2012•Unpublished venueRequires access

Executive Compensation and Hedging Behavior: Evidence from Taiwan

Ming‐Cheng Wu, Szu‐Lang Liao, Yi-Ting Huang, 廖四郎

Abstract

__________________________________________________________________ Abstract: This study examines the relationship between managerial risk-taking incentives and hedging derivatives usage. We have three results. First, executives’ risk-taking incentives are negatively related to the hedging derivatives holdings, a result consistent with equity-based compensation that promotes risk taking. Second, the indexed stock options appear to create stronger risk-taking incentives than the traditional stock options. Third, managerial risk-taking incentives are significantly related to executive stock options but not stock holdings.

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Key concepts: Incentive, Executive compensation, Stock options, Non-qualified stock option, Equity (law), Restricted stock, Stock (firearms), Business